Retirement provision

The pension agreements of some Board of Management members include a commitment to an annual retirement pension, calculated as a proportion of the former base salary and depending on the number of years of service. Those pension rights were granted until 2005 and remain valid; the same procedure was applied for the relevant hierarchy level for Wilfried Porth for the period before his membership of the Board of Management. The pension rights have been frozen at that level, however. Payments of these retirement pensions start upon request when the term of service ends at or after the age of 60, or are paid as disability pensions if the term of service ends before the age of 60 due to disability. The respective agreements provide for 3.5 % annual increases starting when benefits are received (with the exception that Wilfried Porth’s benefits are adjusted in accordance with applicable law). The agreements include a provision by which a spouse of a deceased Board of Management member is entitled to 60 % of that member’s pension. That amount can increase by up to 30 percentage points depending on the number of dependent children.

Effective as of January 1, 2006, the pension agreements of the Board of Management members were replaced by a new arrangement, the “pension capital system”. Under this system, each Board of Management member is credited with a capital component each year. This capital component comprises an amount equal to 15 % of the sum of the Board of Management member’s fixed base salary and the actual annual bonus, multiplied by an age factor equivalent to a rate of return of 6 % until 2015 and 5 % as of 2016 (Wolfgang Bernhard and Wilfried Porth: 5 % for all years). These contributions to pension plans are granted only until the age of 60. The benefit from the pension plan is payable to surviving Board of Management members at the earliest at the age of 60, even if retirement is before 60. If a member of the Board of Management retires due to disability, the benefit is paid as a disability pension, even before the age of 60.

In 2012, Daimler introduced a new company retirement benefit plan for new entrants and new appointments for employees paid according to collective bargaining wage tariffs as well as for executives: the “Daimler Pensions Plan.” As before, the new retirement benefit system features the payment of annual contributions by Daimler, but is oriented toward the capital market. Daimler makes a commitment to guarantee the total of contributions paid, which are invested in the capital market according to a precautionary investment concept. The Supervisory Board of Daimler AG has approved the application of this new system for all members of the Board of Management newly appointed since 2012. The amount of the annual contributions results from a fixed percentage of the base salary and the total annual bonus for the respective financial year calculated as of the balance sheet date. This percentage is 15 %. This calculation takes into consideration the targeted level of retirement provision for each Board of Management member — also according to the period of membership — and the resulting annual and long-term expense for the Company. The contributions to retirement provision are granted until the age of 62. The benefit from the pension plan is payable to surviving Board of Management members at the earliest at the age of 62, irrespective of their age upon retirement. If a member of the Board of Management retires due to disability, the benefit is paid as a disability pension, irrespective of his or her age upon retirement.

Payments under the pension capital system and the Daimler Pensions Plan can be made in three ways:

as a single amount;

in twelve annual installments, whereby interest accrues on each partial amount from the time payments commence until the payout is complete (Pension Capital 6 % or 5 %; Daimler Pensions Plan in accordance with applicable law);

as an annuity with annual increases (Pension Capital 3.5 % or in accordance with applicable law; Daimler Pensions Plan in accordance with applicable law).

The contracts specify that if a Board of Management member passes away before retiring for reason of age, the spouse/registered partner or dependent children is/are entitled to the full committed amount in the case of the pension capital system, and to the credit amount reached plus an imputed amount until the age of 62 in the case of the Daimler Pensions Plan. If a Board of Management member passes away after retiring for reason of age, in the case of payment of twelve annual installments, the heirs are entitled to the remaining present value. In the case of a pension with benefits for surviving dependents, the spouse/registered partner or dependent children is/are entitled to 60 % of the discounted terminal value (pension capital), or the spouse/registered partner is entitled to 60 % of the actual pension (Daimler Pensions Plan).

Departing Board of Management members with pension agreements modified as of the beginning of 2006 receive, for the period between the end of the last contract period and reaching the age of 60, payments in the amounts of the pension commitments granted as described in the previous section. Departing Board of Management members are also provided with a company car, in some cases for a defined period. These payments are made until the age of 60, possibly reduced due to other sources of income, and are subject to annual percentage increases described above in the explanation of these pension agreements.

Service costs for pension obligations according to IFRS amounted to €3.5 million in 2015 (2014: €2.8 million). The present value of the total defined benefit obligation according to IFRS amounted to €80.0 million as of December 31, 2015 (December 31, 2014: €80.5 million). Taking age and period of service into account, the individual entitlements, service costs and present values are shown in the table. (See table B.54)

B.54 Individual entitlements, service costs and present values for members of the Board of Management

2 The amounts of the present values are primarily due to the low level of the relevant discount rate. Dr. Hohmann-Dennhardt has no entitlement to a company retirement benefit.

Commitments upon early termination of service

In the case of early termination without an important reason, Board of Management service contracts include commitments to payment of the base salary and provision of a company car until the end of the original service period at a maximum. Such persons are only entitled to payment of the annual bonus pro rata for the period until the end of the contract of service or of the Board of Management membership takes effect. Entitlement to payment of the performance-related component of remuneration with a long-term incentive effect that has already been allocated is defined by the conditions of the respective plans. To the extent that the payments described above are subject to the provisions of the so-called severance cap of the German Corporate Governance Code, their total including fringe benefits is limited to double the annual remuneration and may not exceed the total remuneration for the remaining period of the service contract.

Sideline activities of Board of Management members

The members of the Board of Management should accept management board or supervisory board positions and/or any other administrative or honorary functions outside the Group only to a limited extent. Furthermore, they require the consent of the Supervisory Board before commencing any sideline activities. This ensures that neither the time required nor the remuneration paid for such activities leads to any conflict with the members’ duties to the Group. Insofar as such sideline activities are memberships of other statutory supervisory boards or comparable boards of business enterprises, they are disclosed in the notes to the annual company financial statements of Daimler AG and on our website. In general, Board of Management members have no right to separate remuneration for board positions held at other companies of the Group.

Loans to members of the Board of Management

In 2015, no advances or loans were made to members of the Board of Management of Daimler AG.

Payments made to former members of the Board of Management of Daimler AG and their survivors

Payments made in 2015 to former members of the Board of Management of Daimler AG and their survivors amounted to €15.5 million (2014: €16.8 million). Pension provisions for former members of the Board of Management and their survivors amounted to €235.2 million as of December 31, 2015 (2014: €263.0 million).